New uprade this morning in the Globe and MailNo matter what many are thinking about ALA we have a nice upgrade this morning from Raymond James...;
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Seeing its “discounted valuation at odds with [a] de-risked profile” and believing its stock has “experienced weakness well beyond what we would expect given the company’s de-risked business mix and balance sheet,” Raymond James analyst David Quezada upgraded AltaGas Ltd. (ALA-T) to “outperform” from “market perform.” “With shares hovering 29 per cent below Feb. 2020 highs (vs. the TSX down 11 per cent) AltaGas (ALA) has lagged its peer group materially in recent weeks; something we attribute largely to the perception of risks in the company’s midstream segment,” he said. “Of course, we acknowledge these risks are greater than the steady utility business; however, considering ALA’s well-positioned core midstream assets and significantly reduced leverage, we consider the weakness in ALA to be overdone. Importantly, we expect volumes at ALA’s midstream assets to remain largely intact and note that 85 per cent of volumes are covered by take or pay, cost of service, fee for service contracts or are hedged. Accordingly, we believe capital-light organic growth at RIPET and recently completed expansions at Nig Creek, North Pine and Townsend, will more than offset these counter party risks.”
Mr. Quezada raised his target for AltaGas shares to $22 from $21. The average on the Street is $19.03.
“Supporting our constructive stance, we believe recent reductions to leverage (via a string of asset sales) and now greater proportion of regulated earnings are not fully reflected in ALA’s share price,” the analyst said. “While we acknowledge ALA maintains leverage towards the high end of its peer group, we consider current levels manageable and note additional asset sales could further improve leverage ratios. Lastly, we note the company trades at a discount to each peer group and we expect the share price under-performance relative to these respective groups will normalize.”
ALTAGAS LTD
15.35-3.81 (-19.90%)